Japan Current Growth Could Finally End Deflation

Japan’s nominal economic growth will exceed real growth for the first time in 16 years next year, the government said on Friday, signaling that a moderate recovery will continue and help the country emerge from deflation.

The forecast may ease pressure on the Bank of Japan for further action to beat deflation, although the government is expected to keep pressure on the central bank to offer more monetary stimulus if slowing overseas growth hurts prospects of recovery.

“Japan’s economy is expected to recovery moderately on robust private demand,” the government said in the forecast issued on Friday, but warned that yen rises and the global slowdown posed risks to the export-reliant economy.

Economics Minister Motohisa Furukawa said the government would not rule out the possibility of compiling a supplementary budget to support new areas of growth, such as green technology, to ensure that the recovery momentum is sustained.

“Now is a good chance to pull Japan out of deflation as soon as possible. It’s important to take various steps for this,” Furukawa told a news conference.

In the mid-year growth forecasts, the government said it expects Japan’s economy to expand 1.7 percent in the fiscal year beginning in April 2013, from an anticipated increase of 2.2 percent in the current business year.